Federal Income-Tax Treatment on Earnings

Nonqualified distributions: earnings are taxed as ordinary income and may be subject to a penalty.

Conversions: earnings are tax-free after the conversion amount satisfies the 5-year investment period.

Conversions

Conversion to a Roth IRA4: allowed, regardless of modified adjusted gross income (MAGI) or tax filing status. The taxable portion of the converted amount will be treated as taxable income.

Recharacterizations: a Roth conversion can be undone (recharacterized) for any reason. You have until your tax filing deadline (including extensions) of the year you converted to a Roth IRA to undo your conversion.

Rollovers

To employer-sponsored plans: pretax contributions can be rolled over to a 401(k) or to another qualified plan, as well as to 403(b) and 457(b) plans. However, the receiving plan must accept IRA rollovers.

From employer-sponsored plans: eligible pretax and after-tax distributions from qualified plans, as well as from 403(b) and 457(b) plans, can be rolled over.

From/to another Roth IRA: allowed.

From employer-sponsored plans: eligible Roth contributions and earnings in 401(k) and 403(b) plans can be rolled over. In addition, non-Roth balances can be rolled over. (See Conversions for more information.)

Distributions5

Distributions from contributions and earnings can be taken after age 59½ without federal tax penalty.

Mandatory withdrawals must begin no later than April 1 following the year you reach age 70½.

Distributions before age 59½ are subject to a 10% penalty tax unless you qualify for one of the following exceptions under section 72(t) of the Internal Revenue Code:

you’re disabled

you’re taking substantially equal periodic payments

the distribution is for certain medical bills

the distribution is used for health insurance premiums during unemployment lasting at least 12 weeks

the distribution is for post-secondary education expenses

the distribution is used to purchase a first home (up to $10,000 lifetime maximum)

Distributions to your beneficiaries are also exempt from the 10% penalty.

Distributions from contributions can be made any time without taxes or federal tax penalty.

Distributions from earnings are tax-free if your initial contribution to the account was made at least 5 years ago and you meet one of the following conditions:

you’re age 59½

you’re disabled

you’re purchasing a first home (up to $10,000 lifetime maximum)

Payments made to your beneficiaries after the 5-year period are also tax and penalty free. Payments made before the end of the 5-year period are penalty free.

Distributions from earnings are not subject to the 10% penalty as long as you qualify for an exception — same as exceptions for traditional IRAs.

Distributions from a conversion amount must satisfy a 5-year investment period to avoid the 10% penalty. This pertains only to the conversion amount that was treated as income for tax purposes.

Required Minimum Distributions (RMDs)

You must begin taking RMDs no later than April 1 of the year following the year you turn 70½.

All of your IRA balances are aggregated for the purposes of calculating RMDs. Withdrawals may be taken from one or more IRAs.

No RMDs apply during your lifetime.

1 If you are eligible, you can contribute to both a traditional and Roth IRA as long as the combined amount does not exceed the applicable contribution limits shown in the table.

3 Future contribution limits may be adjusted for cost-of-living increases. Contributions for the current tax year must be made by April 15 of the following year, unless that date falls on a Saturday or Sunday.

4 Converting to a Roth IRA is a taxable event, and the rules and tax calculations can be complicated. State income-tax rules for conversions may differ from federal rules. We encourage you to discuss conversion options with your tax advisor or financial professional.

5 For beneficiaries, distribution rules vary depending on your age at death and the beneficiary's relationship to you. For help with distributions and tax-related issues, we encourage you to talk to your personal tax advisor or legal professional.

You can learn more about traditional and Roth IRAs in IRS Publication 590. We also encourage you to discuss your financial goals, eligibility and individual tax situation with your tax advisor or financial professional.

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Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses , which can be obtained from a financial professional and should be read carefully before investing.